Tuesday, February 24, 2015

Jean Tirole is afraid of heterodox economics

Jean Tirole says heterodox economics encourages "relativism of knowledge" and is "the antechamber of obscurantism" (go here). The response from the Association Française D'Économie Politique (AFEP) is here. The context is the creation of a new section of the National Council of Universities (CNU), which would incorporate heterodox approaches to economics, which was discussed here and here before.

Tirole suggests that unless you publish in mainstream journals, and get the approval of people in authority, that won the "Nobel" (Bank of Sweden), Clark or the Yjro Johannson award, you should not count. Heterodox economists are basically: "a disparate group, in trouble with the assessment standards that are internationally acknowledged."

He uses his authority as a "Nobel" winner, to reduce the space for alternative views on the functioning of the economy. Note that in his pursuit of closing spaces for heterodox economists, which would not per se diminish the space for mainstream views, he uses the book by Piketty to show how concerned the mainstream is with important issues in the real world. And Piketty's book is certainly very problematic as a discussion of inequality.

With the criteria of normal science Galileo was an obscurantist. We all know that the established journals publish the conventional wisdom, and that these are closed to heterodox authors for reasons that have little to do with quality. Scientists too follow customs and conventions, and even fashions, which often are disconnected from logic and evidence, as any reader of Thomas Kuhn would know. Tirole does not address any substantive issue. The idea that the mainstream neoclassical theory suggests that markets produce optimal outcomes, and economies move to the natural rate, even in the face of the current crisis, is basically okay with him, and he does not feel he needs to explain why [this is not just Tirole, Krugman keeps repeating that conventional analysis did well during the crisis too, but at least he deals explicitly with the issue; see this, and for a discussion of how little the mainstream has learned from the crisis go here].

Krugman himself recognized he published things that were not correct, and that was part of a strategy to get published. In his words:

By the early 1980s it was already common knowledge among people I hung out with that the only way to get non-crazy macroeconomics published was to wrap sensible assumptions about output and employment in something else, something that involved rational expectations and intertemporal stuff and made the paper respectable. And yes, that was conscious knowledge, which shaped the kinds of papers we wrote. [Italics added]

Respectability is what gets you published in mainstream journals. Willingness to wrap your ideas in crazy models. So that is the problem with the French heterodox authors. They are not sufficiently hypocritical.

The question is why a powerful economist like Tirole is so afraid about heterodox economists. For one, students, and regular people, know when they are been taught crazy models. And if you have something sensible to compare it to, you might be in trouble. Not only you must wrap sensible ideas in crazy models, you must suppress sensible ideas. If nothing else is an indictment of the Nobel in economics, Tirole attitude is. He might be considered 'respectable', since he has the right credentials, but his behavior is disreputable.

4 comments:

If you had seen economic departments in French universities in the 1960s or 1970s, you'd be very afraid too. Krugman is being a little disingenuous here: expectations and rational expectations did not play a big role in some of his work, because of the topics he had chosen to focus on, but they do in other works of similar quality (Sargent, say). Also, Krugman is possibly being defensive because of a math error in his history versus expectations article, which is very brilliant but had the math wrong. Also Krugman is saying this at a time when expectations are strongly anchored and things have become essentially "mechanical" (because of excess capacity, zero lower bound, etc.). I'm a big fan of Krugman, but he does a psychological problem. Tirole may be a bit boring, but he's right: economics should strive to be a science (and books like Piketty's do nothing less than that).

We agree that economics should be a science. The problem is that mainstream marginalist economics has serious logical inconsistencies, that would require abandonment of the theory for more plausible ones. In value and distribution Sraffa's solution, and for the theory of output Keynes/Kalecki's one. That would be a good start for science.